Behavioral Health – Provider Considerations for the Evolution to Value-Based Care
Friday, June 11, 2021

Much of the health care industry has taken significant strides to move reimbursement for medical services away from volume-based, fee-for-service models to value-based care models.  Outside of the inpatient psychiatric hospital setting, value-based models have not reached the same footing in the behavioral health context.  While the daily industry press is replete with articles highlighting payor desire to move to value-based behavioral healthcare, adoption has been slow and seemingly daunting. 

Impediments to value-based behavioral health care include difficulty in identifying standardized treatment models for chronic behavioral health conditions, data gaps and provider reluctance to take on financial risk associated with behavioral health conditions.  While a disconnect between medical and behavioral health care is not a new phenomenon, we see the uptick in payor audits and recoupment claims against behavioral health providers as an indication that the fee-for-service model is ripe for evolution towards value-based care.  Value-based care, while complex to apply to behavioral health, could help payors achieve the cost savings and predictability they are demanding, while giving providers and patients more flexibility in treating chronic behavioral health conditions. 

With this background, behavioral health providers seeking long-term alignment with payors, and perhaps a competitive advantage over their fee-for-service peers, would  do well to wrap their arms around innovating models of care and reimbursement, and to work with payors to develop a path to value-based care.

Value-based care takes a number of different forms, including prospective payment systems based on diagnoses, carrot and stick incentives based on quality, population health management, medical homes, accountable care organizations, clinically integrated networks and more.  Medicare, Medicaid and other third-party payors espouse the advantages of value-based care:

  • Providers are incentivized to be more efficient and to manage chronic diseases more effectively – Under many value-based models, providers spend more time working with patients to prevent disease and keep patients healthier longer, or they spend time managing patients with chronic conditions.  In both scenarios, the focus is, or should be, on innovations in care models and the provision of only those interventions that provide the most value.

  • Payors can control costs and shift risk to providers – Value-based care often allows payors to spread the costs across larger populations and to shift some of the financial risk to providers.  For instance, payors may bundle payments that cover a full episode of care, or may shift the management of a whole population of patients to a provider to take the financial risk of managing their chronic conditions. 

  • Patients become healthier and happier and the overall costs of healthcare go down – If the idea and the implementation of value-based care goes well, patients will indeed be healthier and happier, and they will need less health care, generally.  And when they do need health care, they will receive only those interventions that provide the most value or are the most effective. 

While these goals are meaningful, operationalizing value-based care in the medical world is complicated and constantly evolving.  Value-based care in the behavioral health world is a whole different animal. 

Outside of the hospital context, behavioral health exists along a continuum of care – residential, partial hospitalization (“PHP”), intensive outpatient (“IOP”), and outpatient care.  Depending on patient need, different programs recommend different time frames for each level of care, but because of the unpredictable nature of behavioral health, patients can move either direction on this continuum and can stay in care for long periods.  Reimbursement for the care above the traditional outpatient setting is “bundled” in that payors typically pay a per diem rate for the care provided, but the services that “count” toward that per diem are limited, and other services that may be valuable interventions are either not reimbursed at all or must be separately billed.  For example, services that count toward the requisite hours for intensive outpatient treatment typically include individual, group and family therapy. Those sessions must usually be provided or supervised by a licensed practitioner.  Additional services that add significant “value” to treatment are in addition to the prescribed hours for reimbursement and are not separately billable.  Those include things like peer-to-peer coaching, innovative on-line tools, equine therapy, etc.  Other services, such as medication management and TMS may be separately reimbursable, but state laws and payor policies may prevent the core behavioral health care provider from offering those services.      

The above overview is over-simplified and is not meant to describe the whole universe of behavioral health care, but it offers a backdrop for providers to consider when planning for the move to value-based care and some of the hurdles for providers to understand before accepting any financial risk in value-based care.  With this context, as well as providers’ own experiences, we outline some areas for behavioral health provider to consider as they strategize about the shift to value-based reimbursement.     

More Expansive Bundles

As highlighted above, behavioral health providers offering IOP, PHP and residential care must ensure that a certain number of hours are spent on individual, group and family therapy.  Those services continue to be essential to the provision of care, but there are many other interventions that providers recommend and that patients seek that should be considered when assessing “value.”  For instance, if a provider can show improved outcomes associated with certain innovative treatment modalities, they should be considered when assessing costs attributable to any bundled payment.  At a minimum, certain quality incentive payments could be created above and beyond the per diem rate in order to incentivize providers to innovate.  Payment for medication management services, TMS services, and co-occurring physical disorders could be directed to a residential treatment facility, for instance, to incentivize those providers to incorporate those services early in treatment and to align with physicians and psychiatrists who share their goal making care more efficient and effective.  

Payment Models for the Whole Continuum of Care

We often hear from clients who have received a prior authorization from a health plan that limits the number of days a patient care spend in residential, PHP and IOP, before moving to outpatient treatment.  Those limitations do not align with their treatment model or the treatment team’s recommendations.  Providers should consider what a payment model that accounted for the reality of the patients they treat would look like.  For example, providers should evaluate whether moving to a model that looks more like a prospective payment system work better, such that when a provider admitted a patient with a diagnosed eating disorder and a secondary depressive disorder, it would be paid a set amount and it would be up to the treatment team to determine the time spent at each level of care.  Of course, that assumes that every provider offers the full continuum of care and that every patient needs the whole continuum of care.  Thus, provider should also examine how such a model would work if it only included one segment of care along the continuum.  Provider would also want to evaluate how such a prospective payment system would need to account for co-occurring physical and mental health diagnoses.

Behavioral Health “Homes”

Many care models focus on a medical “home” for each patient.  The medical home is not a location, but rather is a model that directs a patient to a specific provider, usually their primary care provider, to oversee and coordinate all of their care.  There is a significant push for the primary care provider to direct a patient’s mental and behavioral health care as well.  That may make sense for much of the population, but for patients with a specialized need, such as a substance abuse disorder, an eating disorder, or a significant mood disorder, the primary care provider may not be the appropriate “home.”  Specialized behavioral health providers may want to evaluate whether it would make sense for them to be a behavioral health “home,” directing and overseeing patients’ specialized care.  Providers should also evaluate whether such a behavioral health home should be a professional, such as a psychiatrist, or whether it could be a treatment facility itself. 

Population Health Management

In the medical world, providers with a particular specialty are contracting with health plans to manage that payor’s population with a specific condition.  For instance, a nephrology group may contract with a payor to manage all of that payor’s patients with kidney disease.  Typically, they are paid a per-patient-per-month management fee, and then they may take partial or full risk for the management of those patients.  This requires the group to manage the care and increase quality, value and efficiency for the entire population.  Most groups taking on this model have exceptional skill analyzing data that impacts care and contracting with providers who are paid to treat patients in a way that will meet those goals.  = This model may work in the behavioral health world.  A substance abuse facility with a large regional or national footprint could “manage” patients with substance abuse disorders for a health plan.  On one hand, it would guarantee census at facilities, but providers must track and manage the care of those patients.  Before taking such as step, providers would need to carefully consider its infrastructure and data analytics needs to support the model.    

How to Assess Quality?

Every value-based model depends, at least in part, on ensuring quality.  What are the quality metrics most important in the behavioral health space?  Relapse? Readmission?  Length of stay?  Does it depend on the modality?  Further, how do you assess the quality of outcomes based on different interventions?  Is it important that all similar providers are looking at the same type of data so that legitimate comparisons can be made?  If so, who collects that data? 

 Accounting for Innovation

There has been significant innovation in the behavioral health world.  The COVID Public Health Emergency significantly sped up adoption of telehealth models, but other innovation is coming fast and furiously.  These innovations range from digital health applications, wearables, use of peer-to-peer on-line networks, neurofeedback, TMS and more.  With innovation at this pace, there is a possibility of breakthrough treatments that change the care landscape for the better and offer greater access to care because it is not all based on one-on-one interaction with a licensed professional.  Of course, there are also innovations that do not add value.  As discussed above, providers would need to ensure the quality and value of innovation.  Providers should consider how innovative payment models could incentivize the use of new care models or new innovation without losing revenue.  At some point, it seems the industry will need to break free of payment rules that require any payment be tied to one-on-one time with a licensed practitioner, when other innovative models may be supportive of the therapist’s work and help ensure the efficacy of treatment (such as alumni support networks) long term.  Providers need to consider how they can show that value to a health plan, including how such innovation can increase access to care during a time when there is a shortage of individual professions.

State Law Hurdles

State laws are not necessarily the purview of the provider, but often, state laws create hurdles to implementing a full value-based model.  These laws are worth considering as providers and industry groups seek to work with the states to waive certain restrictions if they can prove that patient safety and care will be maintained.  Some of those laws may include:  (1) corporate practice restrictions that do not allow professionals to be directly employed or contracted with a lay corporate entity; and (2) state licensure rules that limit the ability of providers to treat patients via telehealth in a different state.  Providers should consider what other laws or regulations may hinder the adoption of value-based care. 

As behavioral health providers assess their plans for emerging from the COVID pandemic and succeeding in this competitive market, we recommend building a strategy around value-based care.  Value-based care is coming to the industry one way or another.  Providers should be involved in shaping those models in order to ensure the best quality care and outcomes for patients and to increase profitability in the evolving payment world. 


NLR Logo

We collaborate with the world's leading lawyers to deliver news tailored for you. Sign Up to receive our free e-Newsbulletins


Sign Up for e-NewsBulletins